2020 Forex Forecast | 10 July

Foreign Exchange forecast 10 July 2020

covering USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR

USdollar Index Weekly Dollar Index Price Risk Analysis Forecast

(Previous week in brackets)

USD Index LT-M MT-W ST-D
96.65 (97.66)
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
32 (40) 25 (28) 20 (60)
Allocation 50% (50%)


All risk weight time frames are down. Little real directional movement the past few weeks with the USD index hovereing between 96.50 and 97.50. Trend down but still uncertain as to possible market freak out or interventions. Only smaller volume msarkets appear to move on their own a bit more like the Oz. No Change keeping dollar long exposures covered at 50% on a continued basis.

19 June: Some of the most highly regarded economists and financial market analysts are individually voicing strong opposing views for a vastly stronger or weaker dollar in the coming year. These opposite narratives influence risk management strategies and essentially proves the point how manipulated this market is by major governments and central banks. The intervention forces are hidden behind walls where credit lines are still available between major banks. This keeps the market liquid and floating. Interest rates no longer play a role in managing the value of a currency. The technical case still leans towards a weaker dollar but anything can happen. Our risk strategy is best left unchanged keeping a permanent 50% of an average expected exposure dollar receivables covered forward. Unless we see as major shift in the technical picture a percent or so up and down is no reason for an immediate update of this forecast

EUR/USD FX live price, Weekly EURO vs US Dollar Price Risk Analysis Forecast

(Previous week in brackets)

EUR/USD LT-M MT-W ST-D
1.1290 (1.1165)
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
60 (45) 73 (54) 70 (40)
Allocation 50% (50%)


The broad range the past 5 weeks is between 1.12 and 1.14 and seeking clear direction. LT and MT Trend is up with Daily just turning down. This indicates a pause before a bit further dollar weakness in the near future. From a risk perspective also a continued 50% cover on dollar receivables. On future dollar payables the 50% could be kept closer to spot.

19 June: We want to see a clean break of the 12 year downsloping resistance line, now at 1.1860, in order to confirm longer term dollar weakness and only if supported by a strong risk weight trend in favor of the Euro. The technical picture is trending down short term and up medium and long term. This favors the short term elastic to be drawn upward again and favors a stronger Euro in the next several weeks following a bottom formation at or just below the current level. No Change in keeping 50% of dollar receivables covered forward


Cable GBP/USD FX live price, Weekly Sterling vs USDollar Price Risk Analysis Forecast

(Previous week in brackets)

GBP/USD (Cable) LT-M MT-W ST-D
1.2605 (1.2340)
Trend ↓ (↓) ↑ (↑) ↑ (↓)
% Risk
Weight
48 (48) 62 (62) 88 (35)
Allocation 50% (50%)


Sterling/USD (Cable) showed some strength the past week after ranging erratically between 1.2100 and 1.2700 ending the week June 10 at 1.2600. No change to the hedge policy of 50% is still the better risk approach.

19 June: GBP has shown more volatility than other currencies vs USDollar. Risk weight still looks a little suspect to the down side shorter terem whilst long term is seeking direction in neutral territory. Same strategy to maintain a 50% cover on long dollar exposures


USD/JPY FX live price, Weekly USdollar vs Japanese Yen Price Risk Analysis Forecast

strong>(Previous week in brackets)

USD/JPY LT-M MT-W ST-D
106.80 (106.75)
Trend ↓ (↑) ↓ (↓) ↓ (↓)
% Risk
Weight
57 (54) 27 (56) 55 (12)
Allocation 25% (25%)


Even though risk weight is down in all time frames the overall picture is not a hard down for the dollar. We reduced our long dollar receivable hedge to 25% on June 19 and this remains the better risk approach. Limited price movement indicates a potentially weaker yen in coming weeks. This would also mean a weaker yen against most major currencies.

19 June: Yen again followed a 180 degree path against the dollar index trend causing the Yen to rally versus all other currencies. Given the risk weight getting to oversold and nearing an important support area at 106.00 this is an opportunity to reduce dollar cover a little quicker by 25% to 25%. The anticipation of a weaker yen in months to come is driven by the wild fluctuations during the last 3 weeks which are not typical for a currency that deserves strong support. Hence a strategy to allow for this currency pair to settle and cover largely on spot basis


GBP/EUR FX live price, Weekly Sterling vs EURO Price Risk Analysis Forecast

(Previous week in brackets)

GBP/EUR LT-M MT-W ST-D
1.1148 (1.1045)
Trend ↓ (↓) ↓ (↑) ↑ (↓)
% Risk
Weight
40 (45) 37 (55) 85 (30)
Allocation 80% (80%)


The analysis of 19 June materialized entirely which now means GBP is the weaker currency still. We may look to reduce long GBP cover but n ot until we see a much lower level closer to the 1.05 handle around the 2020 low thusfar. No Change.

19 June: Short term GBP may bottom for a temporary trading run against the Long term trend. Medium term risk weight is neutral and currently up but coould as easily turn down again and help push GBP in to support at the 105 handle. If that happens and risk weight is very low we may switch from 80% cover to NO cover temporarily. For now the very long term chart image and tools favor a continuation of that very long term trend of Sterling devaluations. No Change


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Posted in A - All Financial Blogs | 2020 Forecast, FX - USD Index, EUR, GBP, YEN | EYEFORGOLD.

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